Managerial Aristocracy

Plutonomy Series

Citigroup Plutonomy Report, 2005, Excerpts

Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties. In the early 20^th century, capital income was the big chunk for the top 0.1% of households, since the mid-eighties, mainly from oversized salaries. The rich in the U.S. went from coupon-clipping, dividend-receiving rentiers to a Managerial Aristocracy indulged by their shareholders.

The Managerial Aristocracy commandeers a vast chunk of that rising profit share. We think the trend of cost-cutting-balance-sheet-improving CEOs might just give way to risk-seeking CEOs, re-leveraging, going for growth and expecting disproportionate compensation for it. The earth is being held up by the muscular arms of its entrepreneur-plutocrats, like it, or not.

Globalization is keeping the supply of labor in surplus. On-going globalization is making it easier for companies to either outsource manufacturing from cheap emerging markets like China and India, or “offshore” manufacturing, move production to lower cost countries. Those being undercut are losers in the short term. This tends to lead to calls for protectionism and anti-immigration policies.

Louis XIV